Berkshire Hathaway Buys Out Burlington Northern for $26B

Berkshire Hathaway Inc. agreed to to a $26 billion deal to acquire Burlington Northern Santa Fe Corp., the country’s second-largest railroad holding company. This is the biggest acquisition ever made for Berkshire Hathaway.

Berkshire Hathaway chairman and chief executive Warren Buffett said in a statement, “Berkshire’s $34 billion investment in BNSF is a huge bet on that company. It’s an all-in wager on the economic future of the United States. . . . I love these bets.”

The news seemed to made business pundits wet their pants in excitement. I saw dozens of analyses spring up within an hour of the announced deal and BusinessWeek picked both Berkshire Hathaway and Burlington Northern as great stocks. My work as a business journalist makes me aware of many people who view Warren Buffett as a financial genius and rock star, including slavishly following his every move.

However, Buffett is a rarity for using common sense to guide him in acquisitions. Burlington Northern, and railroad companies in general, are stable and an important part of the economy. Forty percent of all freight in the country is hauled by rail and Burlington Northern owns 32,000 miles of track. Only a week ago, Burlington Northern issued a warning to stockholders fourth-quarter earnings and its third-quarter report showed dropping profits. The company’s stock price dropped and it became easy to swoop in and buy, especially  shares in a company with long-term growth — because of access to Pacific ports.

Perhaps Buffett also knows that Burlington Northern owns a lot of Western track — tracks that will be increasingly important in the creation and growth of passenger rail on the West coast. So, while many East Coast pundits are waxing about rising Chinese imports, a few of us are thinking rights-of-way and and bullet trains.